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One of New Zealand's largest supermarket companies has been found guilty of breaching the Fair Trading Act by offering the opportunity to enter into a prize draw to win a holiday, months after the competition had closed. The company has been fined $17,000 in the Manukau District Court yesterday.
To promote selected Signature Range cereals, Progressive Enterprises Limited ran a promotion between 25 May and 31 August 2006, offering customers the opportunity to 'Win one of 5 uplifting trips to the Hunter Valley in Australia'. This offer was made on a sticker on the promotional packets of cereal. The closing date of the promotion, 31 August 2006, was only disclosed in the terms and conditions of entry contained inside the sealed packet of cereal.
Despite the competition closing on 31 August 2006, the Commission's investigation found that the promotional packets of cereal were still being sold in at least 12 stores in Christchurch, Wellington, Palmerston North and Auckland at various times up until early December 2006, whilst Progressive Enterprises' own records show that the cereal was being sold in over 70 locations nationwide. As the information regarding the closing date was inside the sealed packet, consumers who purchased the cereal after 31 August 2006 may not have known that they had no chance of participating in the competition as offered.
The Commerce Commission received complaints from consumers who had purchased the cereal after 31 August and were not able to enter the competition. Progressive Enterprises also received complaints from consumers directly. Despite being made aware of the issue by customers and on a number of occasions by the Commission, Progressive Enterprises' supermarkets did not take adequate steps to remove the promotional packets of the cereal from display.
Commission Chair Paula Rebstock said, "Many consumers are influenced in their purchasing decisions by promotions and competitions, and will choose to buy one product over another based on the possibility of entering a competition to win a prize. Not only did the situation with this cereal mislead consumers, who thought they could enter a competition, but it potentially harmed the business of other cereal makers who may have lost sales due to the cereal prize promotion."
"Competitions and promotions are a powerful marketing tool for many businesses. Businesses invest in promotions to increase their market share and gain recognition for their brand," Ms Rebstock said.
"Businesses need to ensure that they provide accurate information so consumers can make informed choices about the products that they purchase." Ms Rebstock said the case is also a reminder to businesses to have effective compliance systems in place. "The Commission acknowledges that Progressive Enterprises' offending was, in part, caused by a series of errors. However, it is important that traders, when made aware of potential issues with the Fair Trading Act, ensure that they have systems in place to adequately deal with those issues. It is disappointing that one of New Zealand's biggest businesses did not have an effective system in place to ensure that these errors did not occur and that the offer was not made once the competition had closed," said Ms Rebstock.
This case is a timely reminder to businesses that when they run competitions and promotions, closing dates for the competition should be clearly indicated on all promotional material.
The Fair Trading Act
Section 17(a) of the Fair Trading Act states:-
"No person shall, (a)
In connection with the supply or possible supply of goods or services…;
offer gifts, prizes or other free items with the intention of not providing them or not providing them as offered."
Court penalties for breaching the Fair Trading Act can include fines of up to $200,000 for a company and $60,000 for an individual. Only the courts can decide if a representation has breached the Act.
Progressive Enterprises Limited holds approximately 45 percent of the New Zealand grocery market and operates the Foodtown, Woolworths and Countdown supermarket banner groups. Progressive Enterprises Limited is also the franchise co-ordinator for the FreshChoice and SuperValue banner groups. Wholesaling is conducted through The Supply Chain.
Progressive Enterprises Limited employs some 18,000 people nationwide within 150 supermarkets trading under the Countdown, Foodtown and Woolworths banners, 22 Woolworths Quickstop and Micro convenience stores, several meat processing plants, warehouse operations and support offices.
According to a November 2006 market survey, Progressive had a 40 percent ($78 million) share of the $195 million annual cereal sales in New Zealand.